May 16, 2020

Can US manufacturers cope with healthcare costs and remain globally competitive?

Manufacturing
People and Skills
People Managament
Healthc
Admin
3 min
Looking 10 to 20 years ahead, GHX customers predict supply chain’s strategic role in a very different healthcare landscape
As manufacturers in the U.S. strive to meet the challenge to abide by government regulations for healthcare, two things are clear.First, this challenge...

As manufacturers in the U.S. strive to meet the challenge to abide by government regulations for healthcare, two things are clear. First, this challenge presents a clear disadvantage for our manufacturers, compared to overseas manufacturing companies that aren't subject to the U.S.'s employee healthcare mandates. Second, healthcare costs are rising across the board in administrative, direct and indirect ways.

Can manufacturers somehow find ways to overcome these challanges?

Challenges some manufacturers’ face

The employee healthcare mandates pose a specific challenge to manufacturers in the U.S., some of whom employ more than 300,000 employees.

SEE MORE: The Toyota Way: How the automotove giant handles health and safety

Manufacturers like General Electric, Ford and Hewlett-Packard bear the brunt of rising healthcare costs while their counterparts in other countries escape the added strain on operating expenses.

If the auto industry and others are to survive, however, rising healthcare costs must be contained.

The impact of healthcare expenses

There are several ways in which healthcare costs affect manufacturers. One is the added load to administrative employees. Increased oversight and constantly trying to find new ways to keep employees happy with their healthcare benefits have human resource personnel working overtime, sometimes literally.

As the following article shows, the more time that is spent on managing increasingly complex healthcare paperwork, and helping employees in choosing a health insurance plan that functions for their individual needs, the less time can be devoted to improving employee morale and affecting general positive change in the workplace. That's an intangible cost that builds with time.

The direct costs associated with ever rising healthcare costs are more immediate and possibly more dangerous.

As more procedures and coverage are allowed, insurance companies continue to raise their rates, despite previous government assurances that rates would reduce. When rates rise, manufacturers have no choice but to pay up or risk harsh government penalties. And in a global trade economy that already has the United States manufacturing industry on its knees, healthcare costs have the potential to take some of the frailer manufacturers out of the picture altogether.

SEE MORE: Why reputations management is so important to the global manufacturing sector

So how can manufacturing companies compete in the global marketplace with their hands tied by healthcare costs? The solution may be a multi-pronged approach that addresses all the issues facing manufacturers.

Standardising healthcare administration

One possibility may be a standardisation of healthcare administration. If all manufacturers worked together to develop a comprehensive method of managing healthcare administrative requirements, it would place the bulk of their healthcare admin work on autopilot.

Whether manufacturers would be willing to consider such a unified effort, as well as be willing to invest the time and money necessary to grow such a standardized system, is in the cards.

One thing is certain. Healthcare costs aren't going to go down. The promises that Americans thought they heard aren't going to happen, so the sooner all manufacturers get on board the global survival train, the better off they'll be.

Now isn't the time to be divided or to argue about whether the new system is wrong or right.

Now is the time to act.

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May 11, 2021

5 Minutes With PwC on AI and Big Data in Manufacturing

SmartManufacturing
ArtificialIntelligence
bigdata
Technology
Georgia Wilson
6 min
PwC | Smart Manufacturing | Artificial Intelligence (AI) | Big Data | Analytics | Technology | Digital Factory | Connected Factory | Digital Transfromation
Manufacturing Global speaks to Kaveh Vessali, PwC Middle East Partner (Digital, Data & AI) on the application of AI and Big Data in Manufacturing

Please could you define what artificial intelligence is, and what Big Data is?

AI is the ability of a machine to perceive its environment and perform tasks that normally require human intelligence, and it’s a whole field of different technologies, techniques and applications. 

Big data is a set of tools and capabilities for working with, for processing, extremely large sets of data. 

How does AI and Big Data work together?

Big data is just one of the enablers of AI, though as we see increasing volumes of data, it’s one of the most important 

How can this be applied to a manufacturing setting?

Broadly speaking, there are many benefits of AI, and the use of data, which include reducing costs, minimising human error, and increasing productivity and efficiency. The important thing to consider is any setting - for the use of any technology - is what is the problem you are trying to solve? Be it merely automating repetitive tasks or to reinventing the nature of work in factories by having humans and machines collaborate in order to make better and faster decisions.  

Why should manufacturers use AI and Big Data when adopting smart manufacturing capabilities, what is the value for manufacturers?

One view is, again, the economic benefits of AI, which come in manufacturing as a result of: 

1. Productivity gains from automating processes and augmenting the work of existing labour forces with various applications of AI technologies. 

2. Increased consumer demand due to the increased ability to personalise and tailor manufactured products, along with higher-quality digital and AI-enhanced products and services. 

Manufacturing (and construction industries) are by nature capital intensive, and in our 2018 report, “The potential impact of AI in the Middle East,” we estimated that the adoption of AI applications could increase the sectors’ contribution to GDP gains by more than 12.4% by 2030. 

How can AI and Big Data help manufacturers to evolve in the Industry 4.0 revolution? What about those already looking at Industry 5.0?

It’s really about the investment you make now, in order to futureproof your business. 

We typically see two broad strategies or approaches to the adoption of AI. There are things that we can do immediately, without any recourse to Big Data - which is to adopt technologies we describe as Sensing, those involving computer vision, for example. There are plenty of use cases where these can be used immediately in manufacturing, such as for automatic fault detection. However, there is a longer term play which requires investing in data - getting the right collection mechanisms in place, storage, data governance, Big Data capabilities etc - in order to develop increasingly valuable machine learning driven AI use cases. This is absolutely necessary for long term adoption success. 

What is the best strategy for organisations looking to realise the value of AI and Big Data in manufacturing?  

AI and Big Data are only one part of a successful smart factory. The organisations that lead on AI adoption are those who have already made the most progress in digitising core business processes. In order get ahead in using AI solutions at scale, there are a number of technology investments and organisational decisions to be made, including: 

1. Digitising processes ultimately leads to improved ability to generate data, and in the manufacturing setting - with many 100s of sensors generating 1000s of measurements in real time, the result is Big Data. Data is key to building AI so reliable and accurate data acquisition, management and governance are key. The production line and factories play a critical and direct role in the data-acquisition process. 

2. AI strategy, both long and short term, begins with the use cases, the business applications. Manufacturers need to ask where they want to use AI and gather these use cases together and prioritising projects based on a balance of expected impact and complexity of implementation. 

Of course, in addition to technology and business processes, people are at the heart of any successful technology adoption. AI teams need to be composed not only of data scientists, also data engineers and solution architects to enable their work, data stewards to ensure accuracy, and increasingly so call “Analytics/AI translators” who are able to communicate with business leaders and technology experts. Culture is also key, and manufacturers need to enable a data and AI-driven culture, building trust in data and algorithms by educating their workforce about AI and its capabilities, how best to extract value. It’s not just the positive of course, but also the risks and limitations, as these when encountered without expectations having been set, can significantly impact willingness to invest. 

What are the challenges when it comes to adopting AI and Big Data in manufacturing?

PwC research has shown that one of the major challenges to implementing AI is uncertainty around return on investment (ROI). As I said, there is significant investment required for a long term data and AI strategy to be successful, and expectations around the time to see tangible returns must be set realistically. 

Many companies also struggle with the data side: collecting and supplying the data that an AI system needs to operate, and ensuring that it is accurate. Again, this speaks to the bigger investments required in digitisation. 

Some of the main challenges for manufacturing companies with implementing AI at a scale from our research include:  

  • 40% → Technologies not mature  
  • 40% → Workforce lacks skills to implement and manage AI  
  • 36% → Uncertain of return on investment  
  • 33% → Data is not mature yet 
  • 32% → lack of transparency and trust  
  • 24% → Work councils and labour unions  
  • 22% → Regulatory hurdles in home & important markets  

One element highlighted here, particularly around lack of trust, and labour unions, is that AI is typically misrepresented in the media as “replacing” workers, and taking jobs. Yes, there are efficiency gains to be made from automation, as there have been since the first industrial revolution. But we believe that Data and AI are at their most valuable when they are used to augment workers, enhancing their abilities and the products being manufactured. 

Another challenge we’re starting to see emerge is cyberattacks increasingly targeting interconnected equipment and machinery in smart factories. PwC recently hosted a webcast, in cooperation with the National Association of Manufacturers in the US and Microsoft to discuss this. 

What are the current trends in AI and Big Data in manufacturing?  

  • We see companies putting slightly more focus on adding AI solutions to core production processes such as the engineering, and assembly and quality testing 
  • Safety is of significant importance, with techniques adopted in protocol adherence capabilities (for example maintaining safe distance from specific machinery) being adopted in more every day scenarios for COVID-19 protocol adherence 
  • There is considerable interest in predictive maintenance for large machinery involved in manufacturing processes, and also supply-chain optimisation

What do you see happening in the AI and Big Data industry in manufacturing in the next 12-18 months? 

Honestly, I think we’ll see a continuance of where we’ve already been going for the last 12- 18 months. AI and data are already being used in manufacturing but this use doesn’t get as much attention in the media as, say, healthcare, but the success stories are there, and they will continue as operations continue their digital journeys. 

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